Posted by: Patricia Salkin | November 1, 2015

Second Circuit Court of Appeals Finds Department of Housing and Urban Development Did Not Violate Statutes that Prohibiting It from Denying Funds Based on the Adoption, Continuation, or Discontinuation of Any Policy or Law

On February 3, 2015, HUD advised the County of Westchester that its failure to receive a grant for the 2012 fiscal year had resulted in the termination of its qualification as a Community Development Block Grant (“CDBG”) urban county and HOME participating jurisdiction, and that until it requalified, it was ineligible to receive CPD funds. In this appeal, the County challenged final administrative determinations by HUD to withhold funds allocated to the County under the Community Planning and Development Formula Grant Programs (“CPD funds”) for fiscal years (“FY”) 2011, 2013 and 2014. The County’s principal argument was that the conditions that HUD placed on the allocation of these CPD funds violated the Administrative Procedure Act, 5 U.S.C. §§ 701–706 (“APA”), and two other statutory provisions, 42 U.S.C. §§ 12705 and 12711, that generally prohibit HUD’s intrusion into local public policy. Pursuant to HUD regulations, the County must “conduct an analysis to identify impediments to fair housing choice within the jurisdiction” (an “analysis of impediments,” or “AI”). The County asserted that HUD’s repeated rejection of the County’s AIs relied on the substance of local zoning policies that HUD was not permitted to consider. The United States District Court for the Southern District of New York granted summary judgment to HUD and the County appealed.

Under the APA, a reviewing court must uphold agency action unless it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Here, because exclusionary zoning can violate the FHA, and because HUD was required to further the policies of that statute, it was reasonable for HUD to require the County to include in its AI an analysis of its municipalities’ zoning laws. Moreover, whenever HUD rejected an AI submitted by the County, it provided a written explanation grounded in the evidentiary record, and gave the County multiple opportunities to make changes and to resubmit a revised AI. Accordingly, the court upheld the District Court’s dismissal of the claim that HUD’s action violated the APA. HUD did not tell the County that its CPD funds would only be released if certain municipalities in the County changed their zoning laws; instead, HUD required the County to assess and analyze whether certain zoning laws in the jurisdiction impeded fair housing and, if so, to identify a plan to overcome the effects of such impediments.

The County next argued that HUD may not, under either § 12705 or § 12711, condition funding on changes to local policies, including zoning laws. HUD did not at any point tell the County that its CPD funds would only be released if certain municipalities in the County changed their zoning laws, but instead required the County to assess and analyze whether certain zoning laws in the jurisdiction impeded fair housing and, if so, to identify a plan to overcome the effects of such impediments. Because HUD did not deny CPD funds to the County based on the “adoption, continuation or discontinuation” of a zoning ordinance by any municipality, it did not violate either § 12705 or § 12711. Because the court found that HUD may impose such a requirement on jurisdictions that apply for CPD funds, and because the decision to withhold Westchester County’s CPD funds in this case was not arbitrary or capricious, it concluded that HUD’s action complied with federal law.

County of Westchester v United States Department of Housing and Urban Development, 2015 WL 5616304 (2nd Cir. 9/25/2015)


Responses

  1. Exclusionary Zoning has been a major concern since local government’s were granted the authority to create their own zoning laws and regulations. As far back as 1968, the President of the United States created a commission that would investigate the impact of zoning regulations on housing costs. The report stated that:

    “Zoning affects land values in a number of ways. First, by protecting development against the encroachment of undesirable uses, it can help to maintain and enhance property values. Indeed, much of the interest and concern in the zoning system by homeowners is based on this desire to preserve their investment. Second, zoning may raise the price of land designated for certain uses by restricting the supply of such land.”

    Even if there is an good-faith attempt by a municipality to incorporate affordable or fair housing within its jurisdiction, it is often vehemently opposed by the municipality’s current homeowners. This result was also seen in another New York town in Garden City. See MHANY Management Inc. v. Village of Garden City, 985 F. Supp.2d 390 (E.D.N.Y. 2013) (on appeal in 2nd Cir.).

    At its core, a homeowner’s concern is really to protect their investment. And when ideas for affordable housing within their jurisdiction is proposed, homeowners perceive it as a threat to their investment. In the present case of Westchester, it is likely that homeowners tried to prevent this from happening.

    It is no wonder, that an agency like the HUD, realize that this is the case. I believe that the HUD’s regulations for a municipality to be eligible for a grant under the CDBG is not overly burdensome. The grant is in place so it can give incentive to municipalities like Westchester or Garden city to implement affordable housing in a predominately white, and higher income community. Identifying or analyzing its effects on its local zoning laws is a concern that has been consistent since 1968. The HUD gave Westchester the ability to mitigate any discriminatory effects in their zoning laws to be eligible for funds. As the court stated it wasn’t necessary for Westchester to change any of their zoning laws.

    Without these regulations by the HUD it was be impossible for affordable housing to be available in towns like Westchester. The court came out with a correct decision in this case.


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